Business Brokers vs. Advisors
And Why You Need to Know the Difference
Thinking of selling your business?
Let’s talk about brokers versus advisors, and why you need to know the difference.
Business Brokers vs. Business Transaction Advisors: What is the difference?
When it’s time to sell a business, most owners struggle with where to start, what to do, who to talk to. After all, it's been like a child to them for years. It’s hard to let go of your baby!
My name is Darren Kert, and I am the President and Owner of Trusted Business Transaction Advisors. We understand this struggle, and that’s why I'd to talk about the difference between brokers and advisors. There is a difference, and you need to know about it if you're thinking of selling your business.
So, let’s start with the simple definition of the two terms:
- A “Broker” is defined as “A person who buys and sells goods or assets for others”.
- An “Advisor,” on the other hand, is “A person who gives advice in a particular field”.
Just hearing these definitions should give you an idea where we're going with this. But, let’s dig a little deeper into these definitions as they relate to selling your business.
While we are all generally referred to as "intermediaries," a main street business broker would typically take any business, no matter the size or industry. They will then advertise that business listing for sale and wait for the phone to ring or for a buyer to find them.
An advisor will take an in-depth approach to selling your business. He or she will take advantage of direct buyer contacts they have relationships with, including individual investors, family fund offices, and various levels of private equity buyers.
While a business broker will collect all your business information and put it out on all of the online listing services, a good business transaction advisor will typically spend 10-20 hours of interview and prep time with a client to gather any and all relevant information and to develop a solid understanding of the business before moving forward.
Besides a more customized approach to selling your business, what are some of the other differences between ADVISORS and BROKERS?
A reputable advisor firm will have a solid process developed to engage, value and market a client's business. For example, our process is called the Business Transaction Blueprint. This is a proven process that involves nice steps to help you better understand the value of your business, prepare yourself and your business for a sale, and ultimately get the business sold. We do all this so you can have the freedom to move on to whatever it is you want to do with the next phase of your life.
A broker can brag about the “number of listings” they have, but it’s important to show some track record of prior transactions. The accepted industry standard is the most business brokers will sell less than 30-40 percent of the listings they carry and may significantly miss the initial asking value.
Because an advisor takes more time up front to understand your business and help determine the best and most realistic value for your business, the completed sale rate and value of the transaction is typically much higher. At Trusted Business Transaction Advisors, we have a close ratio of more than 85% and nearly every one of our clients has received full asking value, sometimes more than that.
Time is money right?
Another difference between brokers and advisors is that brokers often have so many listings of their docket that they don’t have the time to fully invest in any one business or client. Advisors tend to take on fewer clients in order to give them the full attention they deserve. This often results in a shorter average sales cycle.
There are many moving parts involved in successfully managing everything related to financing, completion of the final asset purchase agreement, inventory management and market timing, which can impact the time it takes to complete a business sale or acquisition. A broker tends to be “hands off” when it comes to those elements of the transaction, while an advisor will hold your hand throughout the entire process--from valuation to closing the sale, and then celebrating the accomplishment with you when it’s all done!
And that brings me to my final point, and this is a personal one.
Trusted Business Transaction Advisors is made up of a team of fantastic people. When you work with us, you get the support of a strong team. We’ve heard from so many of our clients that they love the teamwork aspect we bring to the table. It’s not just an individual broker or a brokerage firm of hundreds of people. It’s a focus team whose number one goal is to get your business sold for the best possible value. And we’re always happy to share names and numbers of clients, letters of reference, and some of the details of the previous transactions.
Well, there you go. I hope this was helpful. It can be overwhelming once you decide, or even as you’re deciding, to sell your business. We get that. I truly hope you learned something here.
Whether you decide to go with a business broker or another advisor, I genuinely wish you the best of luck in your journey. And, if you’re interested in taking the next step with us, give us a call at (330) 388-0768 or click here to request a free Business Value Assessment. I look forward to hearing from you.